WILLIAMS OVERMAN PIERCE ACCOUNTING NEWS
In this issue:
- What is the Private Non-profit Sector Going to Look Like in the New Post-COVID Environment?
- Questions Audit Committees Should Consider in the Current Environment
- Federal Funding Terms Demystified
- Directors & Officers Liability Insurance for Non-profits: What You Need to Know About But Were Afraid to Ask
- How Non-profits Can Protect Their Data and Reputation in the New Era of Data Privacy
In this issue:
- Gwen Vass Retirement
- Final Regulations on the Meals and Entertainment Deduction
- Year-End 2020 May Not Be the “Same as Last Year” for Payroll Taxes and Compensation and Benefits
- Keys to Year-End Tax Savings for Businesses
2020 has been an unpredictable year. Businesses have faced all-ecompassing challenges ranging from protecting employee health and safety to managing unexpected costs to dealing with severe fluctuations in supply and demand for products and services. Some businesses were able to enter new markets and achieve fresh levels of growth, while others had to make tough choices just to endure.
As 2020 draws to a close, we would like to remind you that this year-end may not be the same as 2019 when it comes to payroll taxes and compensation and benefits matters. This alert highlights various areas of change and what employers should be focusing on.
As 2020 draws to a close, employers should be reviewing whether they have properly included fringe benefits in their employee’s and (if applicable) 2% S corporation shareholders’ taxable wages. This is especially true for 2020, since the CARES Act made a number of changes to the rules relating to traditional fringe benefits.
In this issue:
- Closed for the Holidays!
- Is a COVID-19 Baby Boom in the Cards for Real Estate?
- State and Local Tax and COVID-19: Recognize the Risks and Take Advantage of the Opportunities
- IRS Clarifies That SALT Deduction Cap Does Not Apply to Passthrough Entities
- Forgiveness PPP Loans May Reduce R&D Tax Credit
- Leadership Spotlight
Under Internal Revenue Code Section 41(d)(1)(A), a taxpayer cannot claim an R&D tax credit on expenditures (employee wages tend to be a large component of the qualified research expenses) that are not deductible, and based on guidance issued by the IRS in March 2020 (Notice 2020-32), expenses paid using forgiven PPP loan funds will be nondeductible for tax purposes even if they would otherwise be deductible. Consequently, any wages paid to employees using forgiven PPP loan proceeds are not eligible as QREs, thus, decreasing federal and state R&D credits.
In a welcome notice (Notice 2020-75) released on November 9, 2020, the IRS announced that proposed regulations will be issued to clarify that state and local income taxes imposed on and paid by a partnership or an S corporation (i.e., pass-through entities or PTEs) on its income are allowed as a deduction by the PTE in computing its non-separately stated taxable income or loss for the taxable year of payment. As a result, state and local income taxes, whether mandatory or elective, will be deductible at the level of the PTE and not passed through to individual partners or shareholders of the PTE who are subject to the state and local tax (SALT) deduction limitation that applies to individuals who itemize deductions for federal income tax purposes.
As businesses continue to assess the myriad implications of the COVID-19 pandemic, one area of focus should be on the impact of legislation, regulations and guidance issued at the state and local levels. This becomes increasingly more complex for businesses that operate or have employees in multiple states. Over the past several months, state and local governments have released various tax-related measures in response to the coronavirus pandemic, addressing areas such as state income tax, sales and use tax, property tax and unclaimed property. These measures could affect state tax obligations. In addition, some states have introduced measures that provide relief and/or incentives to businesses.
The impact of blackouts, national emergencies, recessions and other singular or cyclical events on the U.S. birth rate has been a subject of study and interest since the Baby Boomer phenomenon displayed the far-reaching effects a population surge can have on everything from consumer spending to federal budget allocations. As such, there has been conjecture on what effect the pandemic may have on population growth and what the resulting impact on the real estate and construction industries may be.
Earlier in the year, the SBA announced in an updated FAQ on the program that it will be auditing all Paycheck Protection Program (PPP) loans of $2 million or more. Borrowers whose loans meet this threshold amount might receive a Loan Necessity Questionnaire from their lender soon after they apply for loan forgiveness.
In This Issue:
- R&D Tax Credit FAQs For Large and Small Businesses
- Finding Relief: Tax Strategies to Generate Immediate Cash Flow
- Optimizing Operations: Uncover Tax Relief Opportunities
- Keeping Your Financial Plan Aligned With Your Goals in Today’s Market Environment
The federal R&D tax credit benefits large and small companies in nearly every industry. Common questions and answers related to the R&D tax credit and those specific to small businesses are outlined below in this article.
During these challenging times, companies must have access to cash to help offset unforeseen costs, whether for buying personal protective equipment (PPE) for on-site employees or investing in the technology needed to keep a remote workforce safely and efficiently connected.
The tax function can be instrumental to identify and execute cash flow opportunities and to maintain the levels of liquidity needed to navigate the uncertainty that lies ahead. In the short term, tax professionals should look to “low-hanging fruit” to generate benefits as quickly as possible.
Although companies that have managed to survive up to this point will have overcome immediate safety and cashflow problems, they still face an uncertain future. No one can predict how long the downturn will last, whether the world will revert into crisis mode or whether the path towards long-term recovery has begun.
Despite the persistent uncertainty, savvy companies can position themselves to outperform their competitors by capitalizing on market shifts and strengthening their core business models. To do so, liquidity will continue to be at a premium, but many companies at this stage should be able to spend a bit in order to reap considerable returns. The tax function is poised to help them do just that.
After conquering tax solutions that are within reach, it’s time to consider low-risk strategies that will plant the seed for future growth.
The extreme market volatility of the past seven months has left many investors wondering how their investment portfolios have held up during 2020’s rollercoaster ride. We believe that rather than just thinking about the status of your investment portfolios relative to certain short-term equity or fixed income benchmarks, investors should remain focused on the long-term rate of return which will drive their progress toward achieving their long-term goals.
While the market volatility of 2020 has been remarkable, valuations and capital markets assumptions are always evolving. Your goals and family situation may be changing as well. That is why is it so important to meet with your advisor regularly to revisit your overall financial plan and ensure that it remains aligned with your long-term goals.
In this article, we identify five principles of our planning and investment process that we reinforce during conversations with clients to review their financial plans.
In This Issue:
- President Signs Protecting Nonprofits From Catastrophic Cash Flow Strain Act…Into Law
- “Are We Paying Our Executive Appropriately?”
- FASB Issues ASU On Contributed Nonfinancial Assets
- IRS Proposes Excise Tax Relief For Exempt Organization Executive Compensation
- Is Your Organization Audit Ready?
- Privacy Shield Invalidated – Nonprofits May Not Be Affected But Should Be Aware
- Using Data To Create An Infrastructure of Success
- Nonprofits Have Additional Time To Comply With New Lease Accounting Standards
- Other Items to Note
- Main Street Lending Program Open to Nonprofits
In This Issue:
- Addressing Missed 401(k) Plan Deadlines During COVID-19
- How To Plan for Succession: Preserving, Protecting, And Passing On Wealth
- The Great Experiment: Remote Work and the New Reality of Real Estate
- The Path to Retail Recover
The COVID-19 pandemic has put many extra burdens on 401(k) plan sponsors. In addition to navigating all of the uncertainty related to the economy and workplace safety, plan sponsors have had to keep an eye on regular retirement plan procedures and deadlines. Often, workplaces were shut-down for extended periods (and may still be off-limits), so the employees responsible for handling those matters might not have been able to access records or other materials necessary to ensure timely compliance. In some cases, employers may have even laid off or terminated those employees due to a sudden downturn in business.
So, it is entirely possible that 401(k) plan sponsors may have missed some compliance deadlines—especially during the chaotic first few months of the pandemic which started in mid-March for most of the United States. In recognition of this, the federal government has offered some relief for plan sponsors trying to address deadlines that were potentially missed.
On August 28, 2020 the IRS issued Notice 2020-65 that provides some needed guidance for employers wondering whether and how to comply with the employee payroll tax deferral described in the August 8, 2020 Presidential memorandum (often referred to as an “executive order”.) Even though the Notice leaves many questions unanswered, it addresses some key items.
The decisions made regarding ownership of the family office or closely held business may not necessarily be the same decisions that are required for leadership and management. It’s critical to understand and acknowledge the different elements that proper succession planning entails.
There’s no question the global pandemic of 2020 quickened trends of the future that were hitting the wall of the present: Employers resistant to allowing employees to work remotely suddenly had no choice as localities enacted mandatory stay-at-home measures.
Businesses migrated to remote work on an unprecedented scale – a great experiment, the ripple effects of which are many for real estate. As parts of the business world adjust to working from home, some are finding multi-year office leases may no longer be required or, at a minimum, their needs for physical space will decrease. Others are looking to downsize given the impact of the recession on revenues. What does the future hold for landlords and developers managing commercial space?
COVID-19 has shaken nearly every aspect of the retail industry. Retailers have been grappling with never-before-seen store closures, supply chain disruptions and personnel changes. Even as the country slowly opens back up for business, we know retailers will continue to feel the pandemic’s impacts for several sales quarters to come. Going forward, charting a digitally-enabled, customer-centric path to recovery will be crucial for long-term success.
The retail industry is no stranger to disruption, and COVID-19 has largely accelerated existing trends that were already unsettling to traditional retailers. The rise of e-commerce and decline in foot traffic, tightening purse strings due to recession concerns and need for digital transformation were just a few of the contributing factors to the bifurcation of retail Thrivers and Survivors pre-pandemic.
In This Issue:
- COVID-19 Pandemic Reinforces Benefits of Outsourced Accounting
- Using the Tax Withholding Estimator Will Help Taxpayers Avoid Surprises Next Year
- IRS Adds New FAQs on Cares Act Payroll Tax Deferrals
- The 2020 Tax Planning Paradox – Accelerate Income to Lower Your Total Tax Liability
- Staff News
As 2020 winds down, it’s time to consider year-end planning. It’s an unusual year, with taxpayers experiencing losses due to the economic downturn and the possibility of higher income tax rates next year. Consequently, we need to rethink the traditional year-end advice of deferring income and accelerating deductions to minimize one’s total tax liability over the years. Accelerating income in 2020 has several advantages.
The IRS recently added numerous frequently asked questions (FAQs) on the payroll tax deferrals under the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136). Although the FAQs cannot be relied upon as legal authority, they are an indication of the IRS’s thinking.
Paycheck Protection Program Frequently Asked Questions (FAQS) on PPP Loan Forgiveness
Courtesy of the U.S. Small Business Administration
As of August 4th, 2020, the Small Business Administration (SBA), in consultation with the Department of the Treasury, is providing this guidance to address borrower and lender questions concerning forgiveness of Paycheck Protection Program (PPP) loans, as provided for under section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), as amended by the Paycheck Protection Program Flexibility Act (Flexibility Act). This document will be updated on a regular basis.
In This Issue:
- When Disasters Collide: Are You Prepared for a Hurricane During a Pandemic?
- IRS Launches Office to Help Make Issue-Resolution Digital
- 5 Reasons Borrowers Shouldn’t Rush Their PPP Forgiveness Applications
- IRS Updates Annual Dirty Dozen Tax Schemes for 2020
- Staff News
On June 30, 2020, Governor Cooper signed House Bill 1080 (HB 1080) into law. The omnibus tax bill contains many updates to the various taxes imposed by North Carolina. However, this alert primarily focuses on changes to North Carolina’s corporate and personal income taxes. Notably, the bill updates North Carolina’s IRC conformity date, while also decoupling from certain provisions of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
In this Issue:
- Nonprofit Organizations – Staying Functional and Safe in the Age of Coronavirus
- Reforecasting Your Budget
- Strengthening Internal Control in the COVID-19 Environment
- Looking Ahead – An Assessment of the Future of Higher Education Amidst the Impacts of COVID-19
- CARES Act Funds for Governments
- COVID-19 and Privacy: What Do Nonprofits Need to Know?
- Managing Compensation in the ‘New Normal’
- How Many Unrelated Trades or Businesses Do You Have?
- Federal Reserve Proposes Expanding Main Street Lending Program to Nonprofit Organizations
- Other Items to Note
Even in the best years, hurricanes present a significant threat to businesses of all sizes. Few would argue that 2020 has been a good year. While businesses are still struggling to manage the impacts from COVID-19 and return to some degree of normal operations, the 2020 Hurricane Season has already begun threatening their progress. Leaders are, understandably, focused on the viability of their businesses and preparing to weather a recession but, to protect your employees and operations, now is the time to prepare for the potential impacts of a hurricane. Amidst a global pandemic, our existing contingency plans aren’t likely to hold up. For example, how do you safely protect your physical assets when there are limited employees allowed onsite at any given time? How well do you understand the ways that COVID-19 will impact hurricane response and are you prepared to respond to and recover from a hurricane impacting your business in this environment?
In This Issue:
- IRS Expands Relief for Coronavirus-related Retirement Plan Withdrawals
- Steps to Take to Prepare for a Recession
- Medicare Changes in Response to COVID-19
- Staff News
The Paycheck Protection Program Flexibility Act of 2020 (H.R. 7010) (PPP Flexibility Act), enacted on June 5, 2020, makes welcome changes to the forgiveness rules for Paycheck Protection Program (PPP) loans made to small businesses in response to the novel coronavirus global pandemic (COVID-19). The PPP Flexibility Act greatly increases the likelihood that a large percentage of a borrower’s PPP loan will be forgiven. PPP loans (and related forgiveness) were created by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (Public Law 116-136), which was enacted on March 27, 2020. The PPP Flexibility Act also eliminates a provision that made recipients of PPP loan forgiveness ineligible to defer certain payroll tax deposits.
In This Issue:
- Due to COVID-19, Manufacturing Will Experience Five Years of Innovation in the Next 18 Months
- COVID Tax Tip 2020-59
- What To Do With Your Stimulus Check
- Telemedicine Company Doctor on Demand Bets on Coronavirus Changes With Big Medicare Push
- Staff News
- Leadership Spotlight: Ashley Bolick
Washington — Friday, May 15, 2020, the Small Business Administration (SBA), in consultation with the Department of the Treasury, released the Paycheck Protection Program (PPP) Loan Forgiveness Application and detailed instructions for the application. The form and instructions inform borrowers how to apply for forgiveness of their PPP loans, consistent with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). SBA will also soon issue regulations and guidance to further assist borrowers as they complete their applications, and to provide lenders with guidance on their responsibilities.
Today, the SBA published Frequently Asked Question (“FAQ”) 46, which provides some answers for PPP borrowers who are concerned about the good faith certification. Following the recent announcement that the Small Business Administration would review any Paycheck Protection Program loans made in amounts exceeding $2 million, the agency today issued guidance extending an automatic safe harbor to borrowers receiving PPP loans with an original principal amount of less than $2 million. These borrowers “will be deemed to have made the required certification concerning the necessity of the loan request in good faith,” SBA said in updates to its PPP FAQ today.
Borrowers that received PPP loans for amounts over $2 million will be subject to review by the SBA for compliance with program requirements, including the certification of economic need. “If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness,” SBA said.
On April 30, the IRS issued Notice 2020-32 providing guidance regarding the deductibility for federal income tax purposes of certain otherwise deductible expenses incurred in a taxpayer’s trade or business when the taxpayer receives a loan (covered loan) pursuant to the Paycheck Protection Program (PPP).
On April 9, the Federal Reserve announced additional actions it will take to provide up to $2.3 trillion in loans to support the U.S. economy. The Federal Reserve believes this funding will assist households and employers of all sizes and bolster the ability of state and local governments to deliver critical services during the coronavirus pandemic.
Business leaders face an array of questions they need to answer and information they must analyze during the rapidly evolving response to the COVID-19 pandemic.
Paycheck Protection Program Loans Frequently Asked Questions (FAQs)
Courtesy of the US Department of the Treasury
As of April 7, 2020, the Small Business Administration (SBA), in consultation with the Department of the Treasury, intends to provide timely additional guidance to address borrower and lender questions concerning the implementation of the Paycheck Protection Program (PPP), established by section 1102 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act or the Act). This document will be updated on a regular basis.
Nonprofit organizations and higher education institutions have been hard at work trying to help the world navigate the novel coronavirus (COVID-19) pandemic. While trying to maintain focus on their missions, these organizations and institutions face massive uncertainty in the face of COVID-19, including financial turmoil, layoffs, remote work, quarantines, shelter-in-place orders and other measures.
In This Issue:
- New Retirement Account Rules in Response to Coronavirus
- Electronic Payments Look More Appealing as People Fear Cash Could Spread Coronavirus
- What to Do With Your 401(k) When You Retire
- Parents Who Adopt Can Benefit From This Valuable Tax Credit
- Meet Our Wilmington Office Staff
- Leadership Spotlight: Michael H. Womble, CPA
Raleigh, N.C. – North Carolina leaders announced shared bipartisan support for deferring the accrual of interest on state income taxes filed before July 15, 2020, in a joint statement released by General Assembly lawmakers and Governor Cooper on Tuesday, March 31, 2020.
After days of furious negotiations, Congress has passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The $2.2 trillion price tag for tax relief and incentives for individuals and businesses makes it the most expensive piece of legislation ever passed. It includes a provision for a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis.
Coronavirus Emergency Loans Small Business Guide and Checklist
COURTESY US CHAMBER OF COMMERCE
The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program, the initiative provides 100% federally guaranteed loans to small businesses who maintain their payroll during this emergency.
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security (CARES) Act, which provides relief to taxpayers affected by the novel coronavirus (COVID-19). The CARES Act is the third round of federal government aid related to COVID-19. We have summarized the top provisions in the new legislation below, with more detailed alerts on individual provisions to follow.
The N.C. Department of Revenue (NCDOR) recently announced that they will extend the April 15 tax filing deadline to July 15 for individual, corporate, and franchise taxes to mirror the announced deadline change from the Internal Revenue Service.
The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date is automatically extended from April 15, 2020, to July 15, 2020.
On March 18, 2020, the Internal Revenue Service released Notice 2020-17, formal guidance describing relief provided to taxpayers for federal income tax payments due April 15, 2020. Notice 2020-17 is available here.
The Families First Coronavirus Response Act (H.R. 6201), became law on March 18, 2020. The Act guarantees free testing for the novel coronavirus (COVID-19), establishes emergency paid sick leave, expands family and medical leave, enhances unemployment insurance, expands food security initiatives, and increases federal Medicaid funding.
In This Issue:
- Coronavirus Strikes Nonprofits in More Ways than One
Now present on every continent except Antarctica, COVID-19 has infected more than 125,000 people, and is responsible for more than 4,600 deaths. With the number of cases in the U.S. continuing to climb, individuals and companies alike are taking steps to prepare for a pandemic. From a shortage of masks and hand sanitizer, to CDC-imposed travel restrictions and the cancellation of conferences and other large events across the globe, this public health emergency is rapidly evolving and all sectors are having to navigate its impact and uncertainty around what the future holds.
The nonprofit industry is no exception—in fact, they face more challenges than most.
In This Issue:
- New Rules for Deducting Meals and Entertainment
- Final Section 263A Regulations
- IRS Proposes Rules to Update Income Tax Withholding, Revises Form W-4
- Are you interested in joining an energetic, growth-oriented firm?
- Staff News
- Leadership Spotlight: MaryEllen Prance, CPA
What is Section 263A? Section 263A, often referred to as the Uniform Capitalization rules or UNICAP, requires taxpayers to capitalize direct and indirect costs properly allocable to real or tangible personal property produced or acquired for resale by the taxpayer. For example, manufacturers, resellers and distributors of inventory generally must undertake an analysis every tax year to determine which costs must be capitalized, rather than currently expensed, under Section 263A. The costs that must be capitalized for tax purposes typically exceed the amounts capitalized for financial accounting purposes. Accordingly, many taxpayers must capitalize “additional Section 263A” costs to property acquired or produced as an unfavorable temporary book/tax adjustment (i.e., an addback to taxable income).
In This Issue:
- Williams Overman Pierce, LLP + Barker Jones & Co.
- Williams Overman Pierce Is Pleased to Announce That Dan Lavelle Has Been Admitted as Its Newest Partner
- Williams Overman Pierce Staff Promotions
Fringe benefits are defined as a form of pay for performance of services given by a company to its employees as a benefit and must be included in an employee’s pay unless specifically excluded by law. Please note the actual value of the fringe benefits provided must be determined prior to December 31 in order to allow for the timely withholding and depositing of payroll taxes. In this article, you will find information regarding the identification and tax reporting for several fringe benefits that are customarily provided.
In this Issue:
- Power of Real-Time Insights to Improve Donor Communications
- GASB Proposes Guidance to Address the Phaseout of Interbank Offered Rates
- FASB Issues Proposed Standard Related to Reference Rate Reform
- Tax Exempt & Government Entities Division Releases 2020 Program Letter
- Vet or Forget? The Case for Background Checks for Nonprofit Board Members
- Test Your Cyber Systems in 7 Steps
- What Plan Sponsors Need to Know About DOL Enforcement and Red Flags
In This Issue:
- Cybersecurity in 2020: Top Ten Predictions and Recommendations
- Get Ready for Taxes: What to Do Now Before the Tax Year Ends
- Window for Opportunity Zones Is Narrowing
- Spotlight: Jon Howard, CPA
The World We Live In! According to EY’s 2018-2019 Global Information Security Survey, over 6.4 billion fake emails are sent everyday by nation-state cyber-attack groups, criminal cyber-attack groups, and hackers worldwide. This results in the theft of over 2 billion private identities and $3.5 billion in cyber damages daily.
As the end of 2019 approaches, so does the deadline to receive specific tax benefits for Opportunity Zone investments.
Congress created the Opportunity Zone program as part of 2017 tax reform, also known as the Tax Cuts and Jobs Act of 2017 (P.L. 115-97). Opportunity zones are census tracts in low-income communities across the country that have been identified for preferential tax treatment: Investment in these communities, through what is called a Qualified Opportunity Fund (QOF), could result in permanent exemption of up to 100% of capital gains taxes. For private equity investors and asset managers looking for certain capital gains deferrals, the deadline to invest and receive all of the tax incentives is December 31, 2019.